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Microsoft wins $ 10 billion JEDI defense cloud contract, beating Amazon

Microsoft CEO Satya Nadella speaks at the Digital-Life-Design Conference in Munich, Germany, January 16, 2017.

Tobias Hase | dpa | Getty Images

Microsoft has won victories in a dramatic competition for public cloud resources for the US Department of Defense, beating Amazon Web Services market leader, the Pentagon said Friday. The contract could be worth as much as $ 10 billion over a decade, according to a statement.

Microsoft shares rose 2.3% in expanded trading following the announcement, and Amazon shares fell more than 0.5%.

The achievement highlights the rise of Microsoft's Azure cloud as a challenger to AWS and represents the latest victory for Satya Nadella, who took over for Steve Ballmer as Microsoft's chief executive in 201[ads1]4. Microsoft has also won major cloud infrastructure deals from companies such as Walmart , even as AWS has continued to grow.

If the deal ends up being worth $ 10 billion, it's likely to be a bigger deal for Microsoft than it would have been for Amazon. Microsoft does not report Azure revenue in dollar terms, but it is widely believed to have a smaller market share than Amazon, which received $ 9 billion in revenue from AWS in the third quarter.

Other, smaller cloud rivals such as IBM and Oracle were kicked out earlier in the process, which have been disputed and delayed.

In July, President Trump said he looked at the contract after companies protested the contract. Then Defense Secretary Mark Esper said he would look into it. Earlier this week, the Pentagon said Esper had withdrawn from the process because his son Luke Esper works at IBM.

Early in the process, Amazon was seen as the favorite, partly because the AWS business won a deal with the CIA in 2013. Amazon, too, had been certified at the highest existing security clearance level, while Microsoft was trying to recover.

Nadella once ran the Azure business, including responsibilities in her 27-year career at Microsoft. He has made cloud a bigger piece of Microsoft while reducing the emphasis on Windows. The company has also embraced Linux, and after Nadella joined, the cloud was renamed Windows Azure to Microsoft Azure, reflecting the possibility of running Linux in Microsoft's public cloud.

Amazon and Microsoft did not immediately return a request for comment.

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